RMMI acquires 24% of Nalco's aluminium smelter

Following Nalco's agreement with the Government of Indonesia to set up an aluminium smelter, Nalco signed a Memorandum of Understanding (MoU) with RMMI on December 19, 2008.

Through this memorandum, Nalco will leverage on RMMI's existing coal mine operations and infrastructures, to provide the coal energy for the plant and manage the logistics needed for the operations of the proposed aluminium smelter.

Under the MoU, RMMI will provide 5 million mtpa of low sulphur thermal coal to manage the energy needs of the aluminium smelter. This equity stake brings the overall investment of the smelter and power plant to $4bn. While operations of the newly proposed smelter plan to leverage on RMMI's current infrastructure projects, it will actively scout for other viable locations in Indonesia that are deemed to be better suited to facilitate the logistics requirements of the smelter.

Madhu Koneru, Managing Director of RMMI, said:

"Through this joint venture, RMMI will be able to expand its mining capacity in Indonesia, and increase the much needed supply chain infrastructure surrounding our current operations in South Sumatera. This smelter will also complement the smelting and metal based fabrication industries that have been proposed under our MoU with the Government of South Sumatera."

The MoU, signed with the Government of South Sumatera in February earlier this year, aims to develop an industrial park with supporting facilities at Tanjung Api-Api in South Sumatera with a twofold objective: supporting mining-to-export chain of coal, and developing local economies surrounding the greenfield coal mines. Further, the building management of the logistics infrastructure will be escalated by the Government of South Sumatra's commitment to providing sufficient land and fast tracking the approval and licensing of the industrial city.

"Entry of RMMI into the project would create synergic value for the two companies and enhance the commitment to the project. The smelter would be dependent upon efficient port and rail operations in that the raw materials would be imported and part of metal products exported through these facilities. The schedules of construction of port and rail corridor by RMMI on one hand and of smelter and power plant by Nalco on other would be synergised more efficiently through the joint venture," said Bajrang Bagra, Director Finance of Nalco.

The smelter will be managed by PT Nalco International, wholly-owned by Nalco, where Nalco will retain the majority equity stake of 76%, with management control.

Nalco, India's key aluminium producer and a public listed company in which the Government of India hold majority stake, has an estimated turnover of $1.5bn and 25 years of experience in mining bauxite, alumina refining, power generation and aluminium smelting. The company operates an opencast bauxite mine of 4.8 million mtpa capacity that has been running since 1985, serving feedstock to the alumina refinery at Damanjodi. The capacity of the mine will go up to 6.3 million mtpa by middle of next year under an expansion project on hand. The capacity of alumina refining, power generation and aluminium smelting are also planned to be enhanced by 30% by the same time, involving capital expenditure of roughly $1bn.

RMMI, a joint venture between the Ras Al Khaimah Investment Authority (RAKIA) and Trimex International, is the Middle East's first mining company with a global reach, and has existing investments and operations in coal mines in Indonesia.